Speaker 1: Welcome to Chopping it Up. I'm your host, Mike Hallen,
Speaker 1: the senior Restaurant and food Service analyst at Bloomberg Intelligence.
Speaker 1: Our research and that of bi's five hundred analysts around
Speaker 1: the globe can be found exclusively on the Bloomberg terminal.
Speaker 1: Quick public service announcement. If you like our pod, we'd
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Speaker 1: Apple or Spotify. Today we're joined by Liz Williams, CEO
Speaker 1: of l Poyo Loco. Thanks for doing this.
Speaker 2: Liz, Thanks for having me. Mike.
Speaker 1: Tough loss for ut last night.
Speaker 3: Oh man, I mean it wasn't even the official official bracket.
Speaker 3: We're looking for a new coach this morning though, if
Speaker 3: anyone knows anyone?
Speaker 1: Oh okay, okay, interesting did you fill out a bracket?
Speaker 3: My son did, and I gave him some input, but
Speaker 3: he took none of it.
Speaker 1: So who do you have win in it?
Speaker 3: Oh?
Speaker 2: I can't divulge that.
Speaker 1: Okay, all right, fair enough. I have Duke over Saint
Speaker 1: John's in the final.
Speaker 2: I had to.
Speaker 1: Give a little love to the Big East. Yeah, all right,
Speaker 1: good stuff. Please tell me a little bit about your background.
Speaker 1: I guess starting with your time at Taco Bell and
Speaker 1: what drew you to Elpoyo Loco. Yees.
Speaker 3: So most of my career has been in the restaurant space.
Speaker 3: Before that, I was with Boston Consulting Group for many years,
Speaker 3: and then at Taco Bell, I was part of a
Speaker 3: fabulous team. We turned the brand around many years ago
Speaker 3: working for Brian Nicol and just had a lot of
Speaker 3: fun there. I ran the international business. I was CFO
Speaker 3: and then ran the international business. I got to work
Speaker 3: with some fabulous franchise partners the US and across the globe.
Speaker 3: And then after I left Taco Bell, I wanted to
Speaker 3: do some smaller companies private equity, dabbled in the personal
Speaker 3: care space with dry Bar and just some up and
Speaker 3: coming cons and then I got a call from a
Speaker 3: headhunter actually, and she said, I have the perfect fit
Speaker 3: for you, And it truly was Elpoyo Loco back in
Speaker 3: the restaurant space, a brand I'd always admired. I live
Speaker 3: in southern California, just great food, and I always thought, Gosh,
Speaker 3: why hasn't it grown more, Why hasn't it gotten out
Speaker 3: of the West Coast, And I just saw so much
Speaker 3: potential and then the fact that it literally was the
Speaker 3: headquarters was in my backyard out here.
Speaker 2: I was thrilled to.
Speaker 3: Come in and I have a great team that I
Speaker 3: got to join as I came in.
Speaker 1: All right, So for our East Coasters, it's a QSR
Speaker 1: plus positioning, correct, that is right?
Speaker 3: Yeah, So we sit just between QSR and Fast Casual
Speaker 3: although we have drive throughs, so most of our locations
Speaker 3: have drive throughs, and we're known as having a higher quality.
Speaker 3: So we sit above the traditional QSR players because of
Speaker 3: our quality.
Speaker 1: All right, good stuff is there? You know in your
Speaker 1: part franchise. I think I saw your roughly two thirds
Speaker 1: or seventy percent franchise, is that correct?
Speaker 2: Seventy percent? That's right? Franchise partners.
Speaker 3: And you know we're in seven states, so California is
Speaker 3: where we were born in the US. We were actually
Speaker 3: born in Mexico, but then California and then some western states.
Speaker 3: We are in Texas. We have one restaurant in Louisiana.
Speaker 3: But really the other thing that drew me here was
Speaker 3: just the opportunity for growth. So I've gotten to take
Speaker 3: you know, a brand like Taco Bell and take it internationally.
Speaker 3: This is similar, you know, taking a brand, driving brand awareness,
Speaker 3: positioning the brand so it can go across the United States.
Speaker 1: Is there any uni economic data you can share?
Speaker 3: And economics are great and only getting better. So historically
Speaker 3: this brand had, you know, had margins, you know, high
Speaker 3: teens in excess of twenty percent in the glory days,
Speaker 3: and we see no reason why we can't be back
Speaker 3: in those high teens. And that's what we've told the street.
Speaker 3: Our average unit volumes are two point two million, so
Speaker 3: very healthy there. And you know, in terms of how
Speaker 3: we are looking at the middle of the P and L,
Speaker 3: we think there's still a lot of opportunity and on
Speaker 3: the top line as we drive growth again, I'm really
Speaker 3: excited what we can do just bringing innovation to drive
Speaker 3: growth there. The other piece of unit economics that everyone
Speaker 3: looks at is build costs. When I came in, I
Speaker 3: found our build costs had just gotten completely out of control.
Speaker 3: And I'm pleased to say brought in a great new
Speaker 3: development leader and we've engineered the new development to be
Speaker 3: under two million dollars or targets actually one point eight
Speaker 3: and we're pretty close to that. So when you do
Speaker 3: all those economics, that's finally we're back to a spot
Speaker 3: where people want to grow again, and building that growth
Speaker 3: pipeline has been a lot of fun.
Speaker 1: Great. Can you speak to the consumer demographics of the brand,
Speaker 1: including age, income, methness.
Speaker 3: Yeah, we're pretty evenly split across you know, just what
Speaker 3: the ordinary population would be. We do have some areas
Speaker 3: where we skew, you know, higher Hispanic just being in
Speaker 3: southern California. We're in northern all over California. But you know,
Speaker 3: naturally as California has those demographics, we also you know,
Speaker 3: as the years have gone by and we haven't done
Speaker 3: as much to modernize our demographic has you know, gotten older, however,
Speaker 3: as we are focusing on getting back after that younger
Speaker 3: consumer as well. And when I say younger, I mean
Speaker 3: you know, like twenty five, like in the mid twenties.
Speaker 3: So we're not looking to go after you know, the
Speaker 3: real young kids or you know, of course we love them,
Speaker 3: we want them to come enjoy a play a logo
Speaker 3: as well. But you know, we're the brand that you know,
Speaker 3: you get out of college and you're realizing that you
Speaker 3: can't eat fried food and you know late night QSR
Speaker 3: every every night you want something that's cravable and delicious,
Speaker 3: but grilled is a really good option.
Speaker 2: We're the brand for you, okay.
Speaker 1: Cool. Twenty twenty five seems to be a big year
Speaker 1: for Elpoile Loco. Can you talk about the brand relaunch.
Speaker 3: Yes, I'm so excited to relaunch our brand. We've been
Speaker 3: working with a new agency and they're awesome. We are
Speaker 3: targeting mid May to kind of unveil. We've already started
Speaker 3: to unveil a little bit about our new prototype, our
Speaker 3: new look and feel. And what we've learned is this
Speaker 3: equity we have in quality and equity we have in
Speaker 3: chicken are two great places to start. And chickens are
Speaker 3: growing category. Mexicans are growing category. And so when we
Speaker 3: weave in the chicken with Mexican flavors and really focus
Speaker 3: on the fact that we hand chop our food, we
Speaker 3: cook our food for real, We really cook our chicken
Speaker 3: in the restaurants, unlike some of our competitors. Once we
Speaker 3: showcase that in this new some of these new spots
Speaker 3: that we're filming, I think it's really going to come
Speaker 3: to life for Pule. And then the other piece is
Speaker 3: we want to show people that you know, it's we
Speaker 3: have Loco in our name.
Speaker 2: You know, Loco means so much.
Speaker 3: I know it means crazy, but we think it's crazy
Speaker 3: that you wouldn't cook food the real way, So we
Speaker 3: want to get that message out. We're not the crazy ones.
Speaker 3: It's crazy to not do all the things that we
Speaker 3: do to take care of our food.
Speaker 1: How's the CASA test going?
Speaker 2: Really well, it's delicious. Uh.
Speaker 3: We've landed on an insight that people, you know, while
Speaker 3: they do want to, you know, eat things that at
Speaker 3: times are better for them. So we we do really
Speaker 3: well on salads. We mix about twenty percent on salads
Speaker 3: and bowls, which is pretty high for QSR. But we
Speaker 3: also serve great, craveable, cheesy, uey, gouey food as well,
Speaker 3: and that's where the Casadia fits a different occasion eating occasion.
Speaker 3: And the thing that also has been a huge win
Speaker 3: is the port of ability. Of course, you know, everyone
Speaker 3: is just only getting busier and on the go, and
Speaker 3: the case da is one of those products that that
Speaker 3: is great for on the go. And it also features
Speaker 3: a new Chipotle sauce that's I think I'm addicted to.
Speaker 1: I love a good Chipotle sauce. I can't think of
Speaker 1: Casey d as without thinking about Napoleon Dynamite any thought
Speaker 1: of having Napoleon Dynamite's mom promoted me. I don't know
Speaker 1: if twenty five year olds even know about her. And
Speaker 1: you know which is fix yourself a dang case, Adylla.
Speaker 2: I'll pass that on to our marketing team. You know.
Speaker 3: One of the things that we've we've unlocked as well
Speaker 3: is the Casadia is delicious when you dip it in
Speaker 3: the homemade guacamole, which that's another one of our strengths.
Speaker 3: We make our guacamole fresh in our restaurants every single day,
Speaker 3: whereas a lot of our competitors, you know, bring in,
Speaker 3: you know, guacamole that's was.
Speaker 2: Made weeks ago.
Speaker 3: So I, you know, get the Casadia and dip it
Speaker 3: in some awesome guacamole.
Speaker 1: That's the way to do it. I make a mean
Speaker 1: gualk myself.
Speaker 2: We'll have to share recipes.
Speaker 1: Yeah, yeah, for sure, I'd be happy to why a
Speaker 1: summer launch. Our sales typically strong in the summer for
Speaker 1: you or there? Are you lapping a successful promotion from
Speaker 1: last year? Is there something else.
Speaker 2: For the Casadia?
Speaker 3: You know, we've just got a lot of innovation that
Speaker 3: we're trying to balance. We're actually we've been having a
Speaker 3: lot of conversations on when the Casadia should launch. It's
Speaker 3: doing well in test and you know, should we launch
Speaker 3: it sooner. We've also got our Fresco wraps and Fresca
Speaker 3: salad launching as we get into the later spring and summer.
Speaker 3: It's always a great time to launch a new salad
Speaker 3: and a wrap in the summertime, you know, swimsuit season,
Speaker 3: especially out here, so I guess everywhere across America. And
Speaker 3: we're bringing new Citrus vinigarette, which is also delicious. So
Speaker 3: we're just trying to balance, you know, getting the attention
Speaker 3: of our consumer. Is it too many products and how
Speaker 3: do we pay some sequence?
Speaker 1: Yeah, so, yeah, we're going to see a lot of
Speaker 1: food and innovation that's exciting. How many units have been
Speaker 1: remodeled and what kind of lift are they seeing.
Speaker 3: We're in the process of kicking off a new or
Speaker 3: newer update for new builds that were then transferring over
Speaker 3: to our remodels. I'm excited because when you look over
Speaker 3: the next three years, about half of our restaurants are
Speaker 3: due for a remodel. And what that means is you're
Speaker 3: really going to see us show up with this new remodel,
Speaker 3: the lift that we're seeing. We haven't disclosed any data
Speaker 3: yet only because the few that we've done with this
Speaker 3: new prototype, we just don't have enough to put the
Speaker 3: number out there. I'm hoping in the next couple of
Speaker 3: months we'll be able to. I know, we'll have enough
Speaker 3: that I can put that number out. But anecdotally, what
Speaker 3: I'm seeing is a nice lift and a nice return.
Speaker 3: So I'm pleased with what we're seeing. It's I'm getting
Speaker 3: great customer feedback and I'm getting great team member feedback.
Speaker 3: Just the light bright modern I know, I keep saying modern,
Speaker 3: but modern aesthetic is really resonating with people.
Speaker 1: Great. Why the considerable gap between company owned same source
Speaker 1: sales and franchise same source sales in that fourth quarter.
Speaker 3: You know, it was a a variance in mostly in pricing,
Speaker 3: so just different timing of pricing. Franchises took a little
Speaker 3: more pricing and got upfront with some of that that
Speaker 3: pricing at different times, So that was main the main
Speaker 3: difference there.
Speaker 1: Okay, and we touched on the restaurant margin expansion that
Speaker 1: you see going forward one hundred and ninety basis points
Speaker 1: last year. You know, in the environment we were in,
Speaker 1: is very impressive. You're guiding for another increase in twenty
Speaker 1: twenty five. What do you expect to drive the gains
Speaker 1: this year.
Speaker 2: Yes, we're really proud of being able to do that
Speaker 2: last year.
Speaker 3: You know, for the listeners that might not have heard
Speaker 3: about the twenty dollars minimum wage in California, you know
Speaker 3: that was something people we're really fearful of the unit
Speaker 3: economics and you know, we we rallied together to think
Speaker 3: through taking labor productivity to the next level. And that's
Speaker 3: what we're going to do. Is you know, as we're
Speaker 3: in twenty five as well, we think there's more we
Speaker 3: can do.
Speaker 2: To drive labor productivity.
Speaker 3: So as an example, we put new equipment in the
Speaker 3: restaurants to make things easier for our team members. So
Speaker 3: we used to as we made our salsa by hand,
Speaker 3: we weren't as efficient in things like cutting its veto.
Speaker 3: We put some machinery and helps us cut a tomato faster.
Speaker 3: As an example, we put kiosks in the restaurants. So
Speaker 3: we're also in the midst right now of deploying a
Speaker 3: new labor deployment software that's going to get us even tighter,
Speaker 3: making sure we have you know, aces in their places
Speaker 3: at the right time. We have great team members, so
Speaker 3: the more we can, you know, help them, they just
Speaker 3: get better service. So we'll see labor productivity and then
Speaker 3: also cost of goods. We've really a huge credit. I
Speaker 3: have a a supply chain leader who's just fantastic and
Speaker 3: he has gone through just about every single thing we
Speaker 3: buy and said, you know, how can we how can
Speaker 3: we just review that and you know, think think through
Speaker 3: things in different ways. So that's been really beneficial as well.
Speaker 1: And you touched on a little bit. You're making a
Speaker 1: lot of investments in restaurant tech and kitchen equipment, so
Speaker 1: if you could expand on a little bit, maybe talk
Speaker 1: about how you've prioritized those investments and the pacing and
Speaker 1: the sequencing of the different initiatives.
Speaker 3: Yes, it does take pacing and sequencing. I think we
Speaker 3: all in the restaurant industry want to do things fast,
Speaker 3: but the reality is you can only digest so much.
Speaker 3: So you know, anything that is productivity related or makes
Speaker 3: the team members life easier or the customer's life, you know,
Speaker 3: gets to the front of the line. So as an example,
Speaker 3: our point of sale, we've been in the midst of
Speaker 3: doing a cloud point of sale transition. I have a
Speaker 3: great technology leader who you know has been with us
Speaker 3: for many years and he is already looking at all
Speaker 3: the things then we can plug into this new point
Speaker 3: of sale system again to make team members' lives easier.
Speaker 3: So we've been prioritizing that Kiosks would be the other piece,
Speaker 3: you know, and there it's really the consumer's life easier.
Speaker 3: You know, how do you make it a seamless transaction
Speaker 3: with the consumer. So we've been you know, looking at
Speaker 3: that really carefully. And then a lot of I know
Speaker 3: it's not quite tech, but a lot of cooking equipment.
Speaker 3: So you know, we also are quality is great, but
Speaker 3: how can it get even better? And so we've you know,
Speaker 3: invested in warming cabinets, you know, one of the things
Speaker 3: I am proud of. You know, as I look at
Speaker 3: us as a brand, we're not shy to make the
Speaker 3: investments that are going to drive drive the future.
Speaker 1: Yeah, So a couple of follow ups on that. I
Speaker 1: think I saw that the warming ovens are going to
Speaker 1: let you shut down the kitchen a half hour earlier.
Speaker 1: That should help you save money on labor or guess
Speaker 1: on the electric exactly.
Speaker 3: Yes, yes, and they actually and the you know, best
Speaker 3: part about them is they help the chicken stay more
Speaker 3: moist and juicy. You know, you can just imagine being
Speaker 3: in a kind of like a warming drawer versus you know,
Speaker 3: out on the grill. It's just a better flavor. So
Speaker 3: that's a benefit. But yes, it really helps the team member.
Speaker 3: You know, at the end of their shift, all they
Speaker 3: want to do is you know, clean up and go home,
Speaker 3: and it helps them as well.
Speaker 1: Okay, great, And I would assume that you know you're
Speaker 1: expecting some improvements in turnover and employee turnover.
Speaker 3: I yes, I think all the things we're doing around
Speaker 3: the other piece of you know that I've prioritized is
Speaker 3: our focus on standards, our focus on training, just like
Speaker 3: I keep saying, making things easier. All of that does
Speaker 3: help team member turnover. We're very lucky in that we
Speaker 3: have some of the lowest turnover numbers that I've seen
Speaker 3: in the industry. I think that's a testament to our culture.
Speaker 3: It's a testament to the brand. We're a brand that
Speaker 3: team members.
Speaker 2: Love to be part of.
Speaker 3: You know, we have a I would say a familial
Speaker 3: tradition in terms of, you know, how we work together.
Speaker 3: Team members really appreciate that, but I think we can
Speaker 3: always get better on turnover, and so those enhancements will
Speaker 3: certainly help.
Speaker 1: Yeah, but I love hearing that you're better than peers.
Speaker 1: That's great. Yeah, Elpoil Local owns and operates, you know,
Speaker 1: thirty percent of the stores. That's a sizable amount. And
Speaker 1: why not refranchise and buy back shares at this multiple.
Speaker 3: We love running our restaurants, you know, we always look
Speaker 3: at every different option.
Speaker 2: I think.
Speaker 3: I know we make a lot of money out of
Speaker 3: our restaurants, and I also appreciate the fact that we
Speaker 3: have skin in the game when it comes to working
Speaker 3: with our franchise partners. You know, we're right there alongside
Speaker 3: them in terms of trying to grow sales, but also
Speaker 3: really caring about the middle of the P and L.
Speaker 3: And as we invest in all of these initiatives to
Speaker 3: drive better operations, I think it would be really hard
Speaker 3: to do that without owning our own restaurants right now,
Speaker 3: because we can go test things, we can see things,
Speaker 3: you know, can get things better. We have great franchise
Speaker 3: partners and they test alongside us. We're very fortunate in
Speaker 3: that we're able to do it faster because we can
Speaker 3: do it in both ways, but never say never, you know,
Speaker 3: I think in this industry you've got to always be
Speaker 3: be staying ahead and looking at all your options.
Speaker 1: Okay, so I haven't been to a l Poyo Loco yet.
Speaker 1: I'll be in SoCal again in a few months. What
Speaker 1: should I order?
Speaker 3: Oh, that's a hard one. There's so many things. So
Speaker 3: our burritos are awesome. We've got homemade guacamole in all
Speaker 3: of them, so I would start there. I also love
Speaker 3: our toast autu salad. That's an original favorite. I mean,
Speaker 3: who doesn't love a freshly fried shell. And then if
Speaker 3: you're feeling like you want something a little bit better
Speaker 3: for you, if you just you know, are trying to
Speaker 3: it's the middle of the week, you're trying to be good.
Speaker 3: Our Poyo fitball is a salad. It has leafy green lettuce.
Speaker 3: You've got the grilled chicken on top. That's a really
Speaker 3: good option. And then you know, if you're an old standby,
Speaker 3: go for the chicken on the bone.
Speaker 1: Okay, all right, you have me at burrito and I'm
Speaker 1: gonna have to get a side of chicken on the bone.
Speaker 1: I have a I have quite the appetite, So all right,
Speaker 1: good stuff. Where can listeners go to find their closest
Speaker 1: lpoil loco and what social media channels should we follow
Speaker 1: you on?
Speaker 3: Yeah, so you can always go to our website. It's
Speaker 3: pretty intuitive www dot lfoyoloco dot com. And we are,
Speaker 3: you know, everywhere you'd expect on the social waves. So
Speaker 3: whether it's TikTok or Snapchat and some of the ones
Speaker 3: that people my age are are still using, which would
Speaker 3: be Instagram, Facebook, my kids are you know, prolific on TikTok.
Speaker 3: So I've been trying to get myself, you know a
Speaker 3: little more in the spirit.
Speaker 1: Right, Yeah, my son as well. I buckled. I buckled,
Speaker 1: and I now have a TikTok account. I have stained
Speaker 1: for quite some time, but I'm here now.
Speaker 2: Me too, Me too.
Speaker 1: Well, this is fun. Thanks again, Liz, and please tell
Speaker 1: Ayra I said Hi. I love that guy.
Speaker 2: He's awesome. So lucky to have Ira on the team.
Speaker 2: I will for sure.
Speaker 1: And I want to thank the audience for tuning in.
Speaker 1: If you liked our discussion, please subscribe and leave us
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Speaker 1: Brinker CEO Kevin Hawkman.